3 examples why time - not timing - is your best friend when investing 3 examples why time - not timing - is your best friend when investing 3 examples why time - not timing - is your best friend when investing

3 examples why time - not timing - is your best friend when investing


A common obstacle to beginning investing is that people put too much value into when to enter the market. But data indicate that it’s better to be invested for a long time than to try to time the market. Here’s three reasons why.

1. The power of compounding

Compounding returns is the bedrock of long-term investing, and its value is often underestimated. When you invest, your earnings generate their own earnings over time. This snowball effect is most potent when investments are left to grow uninterrupted. For example, a USD 10,000 investment in the MSCI USA Total Return Index in 1980 would be worth around USD 1,050,000 in 2024, assuming all dividends were reinvested. This is an annualised return of 11.1%. So if you have a long investment horizon, it’s better to allow your savings to do their thing in the markets rather than trying to pick bottoms and tops or "timing" the market.

“It may not seem like a big thing at first, but the compounding effect over time is significant. So, and this cannot be understated, the most important thing in relation to investing is to get started. None of us are able to time the market anyway,” says Peter Garnry, Chief Investment Strategist.

2. The risks of timing the market

Apart from compounding interest working in your favour over time, there are several other reasons why time in the market beats attempts at timing market entry. The first – and arguably most obvious – is that timing markets is an incredibly tough thing to do. Professional investors don’t believe they can do it, so you need a certain level of conviction to believe that you can.

“A very important point in relation to the idea of timing the market is that if you miss out on just a few of the good days, your return over time can suffer exponentially,” says Garnry. Also, timing the market comes with the risk that instead of avoiding the worst days on the market, you risk losing out on the best days, which may be a greater disservice to your savings. Consider the following data for the S&P 500 from 1991 to mid-2024:

Investment scenarioAnnualised
return (%)
Fully invested11.0%
Missed 10 best days8.5%
Missed 20 best days6.8%
Missed 30 best days5.3%
Missed 40 best days4.0%

The data above show that if you were fully invested throughout 1991–2024 in the S&P 500, you would have earned 11% annually on your investment. But if you missed just the 30 best days, you would have halved your entire return.

“The point is that of course we would all like to avoid the worst days in the markets, but missing the best days is also very risky, and manoeuvring in and out of the market at the right time seems almost impossible. So the most salient approach seems to be staying invested as long as you have a long time horizon,” says Garnry.

3.Time is the great equaliser

Missing the best days is, of course, a weird construct because most rallies, or rebounds, are sharpest when markets have sold off badly. So if you are missing the best days probably means that are you missing the worst days as well.

Another way to understand why time invested is more important than timing investment is by looking at your return since a given year in the past, comparing investing at the high (worst entry) or bottom (best entry) of that year. The table below shows annualised returns in US equities from a given starting year until today (mid-2024) based on the best and worst entry.

YearBest entryWorst entry

There are several conclusions we can draw. One of them is that in most normal years, the difference between perfect timing and the bad luck of entering at the worst possible moment is only around 1% annualised. Another conclusion is that when you do have a year with big swings or declines, the timing can make a difference, but being able to time the market is extremely difficult if not impossible.

The far more important lesson is that as you stretch out the time horizon to 30 years, the difference between perfect timing and random bad luck is very small. In our case, only 0.3% annualised (as evident from the difference between the best and worst entries in 1994, or 30 years ago). And in nearly all normal cases in which we are building our portfolios over many years at so many entry points along the way from our regular income, any risks related to timing are further diminished.

In general, the differences are so small that as an investor you should not overcomplicate when to invest. It is better to find cheap passive equity index funds and then make a plan for consistently investing your savings“Unless you get lucky and hit the market at rock bottom, timing means very little because you postpone getting started, waiting for an event that might not happen and miss returns along the way. So instead, spend time finding the right investment for you – preferably at a low cost – and just do it,” says Garnry.

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article

Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
- Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000

Contact Saxo

Select region


The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-au/about-us/awards

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.